Financial Decision : Tottenham Should Build The New Stadium

1384 WordsDec 2, 20156 Pages
Summary
 A. Financial decision: Tottenham should build the new stadium and also hire a new striker. Going ahead with either of the two options without the other will result in a negative net present vaule for the company. B. Market reaction: Based on the data available and the DCF analysis, the market will react positively if the above stated decision is announced. The large investment will show that the company foresees a favorable future. The increase in revenue from the bigger stadium and better player will result in a increase in the market standing of the company. C. Stock Evaluation: According to our calculation: Tottenham will see a hike in its share price by 0.48% for every point increment and it can expect a 7 point increment per season which will result in a 3.35% hike in its share price. D. Company evaluation: The industry average share price is approximately at $5.7 where as Tottenham share price is currently at $13.8. This shows that the company is highly overvalued and steps need to be taken to resolve this situation. Key Points • Tottenham is part of a stable industry where the demand is inelastic due to enormous fan following • They have a huge fan base of more than 20M people world wide with 2.1M followers in U.K • Broadcasting/media rights as well as stadium attendance makes the major chunk of their sales • Based on their EV of 156 and Net Debt/EV of 0.12, they currently stand at the 6th position in the premier league, which means that they have scope for

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